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Commercial Real Estate
May 3, 2017

Building Delivery Methods Defined

Sponsored Content provided by Rob Beale - Vice President, Carolinas Division, W.M. Jordan Company

With every construction project comes a unique set of challenges, and each owner has certain goals and needs to consider as he or she decides which project delivery method is most appropriate.

W.M. Jordan Company has extensive knowledge and firsthand experience with each of the different construction project delivery methods. We understand each method brings varying roles, risks and contractual responsibilities.

The WMJ team gets a lot of questions about our take on the various approaches, so I would like to discuss the three most recognized construction delivery methods, and what I believe to be the advantages and disadvantages of each.

Design/Bid/Build

Design/bid/build is also referred to as a “competitive bid” or “general contracting.” With this method, the owner hires the architect and construction firm separately. The project is designed, and then a general contractor is chosen, usually based on the lowest bid.

Advantages

Since the designer and contractor both report to the owner, competitive bid projects keep the owner involved with most aspects of the project. On some levels, this can simplify the process, making it easier to monitor, from an owner’s perspective.

The goal of this delivery method is to get the lowest price, so if margins are tight but the schedule is not, the Design/Bid/Build option may be the most optimal delivery method.

Disadvantages

Since the progression is very linear, where one phase is completed before another phase begins, the Design/Bid/Build process can often become time-consuming. Project plans must be drafted before the project is released for bid, and the bidding and selection processes add additional time to the project schedule.

Furthermore, the price is not established until after bids are received, and any necessary re-design or re-bidding can further lengthen the schedule. Many would argue that the lowest initial price derived during the hard bidding process does not always equate to the lowest price or the best value by the end of construction. Unforeseen issues can lead to added cost, change orders and schedule extensions.

With this method, the owner is not taking full advantage of the contractor’s expertise with regard to constructability, materials cost and selection, building systems and best value recommendations, which could maximize the long-term efficiency of the building.

It can also be said that the lack of communication and collaboration between the design team and the construction firm as a result of the nature of this delivery method, can put the two parties at odds, making it more difficult to work through any challenges that may arise.

Design/Build

With this delivery method, there is ultimately one responsible party (either the architect or the construction firm) and only one contract for both the design and the construction of the project. Collectively, the architect and contractor team up to form a Design/Build firm, and a guaranteed maximum price (GMP) is decided upon early in the project.
The Design/Build team works together to create project plans for owner approval, followed by subcontractor procurement and then, construction.

Advantages

Many would attest that the biggest advantage of the Design/Build method would be the speed of delivery, as the design process is often concurrent with some phases of construction, making the delivery much faster than the Design/Bid/Build method.

In addition, the owner can look to a single source of accountability and more streamlined communication throughout. In most instances, the construction manager hires and manages the architect, so the design contract and responsibility is not tied directly to the owner.

Disadvantages

While there is only one point of contact for the owner with this method, the architect and CM often collaborate without the owner’s involvement. In some cases, information and checks and balances discussed between the CM and architect can get lost in translation between the design/build firm and the owner and lead to conflicts.

It can also be challenging for the owner to assess whether the absolute best price has been achieved, since the budgets and billing for the design and construction are under the same umbrella.


Construction Manager (CM)

There are two different types of Construction Management (CM) delivery. Construction Management at Risk (CMAR) and Construction Management Agency. With CMAR, the CM firm enters into a GMP contract with the owner, which assures the project will be constructed for no more than the amount designated in the signed contract and no longer than the agreed completion date. All subcontractor contracts are the contracts with the subcontractors and vendors, and are held with the CM firm, who assumes responsibility for their performance and payment.

In the case of CM-Agency, the CM serves as an agent for the owner but the subcontractor contracts are all held by the owner. The CM Agency method is not commonly used in this region, so I would like to focus more on the CMAR method.

Construction Management at Risk (CMAR)

Over the last couple years, the CMAR method of project delivery is becoming increasingly more popular in both the public and private sectors. At the heart of the CMAR method is a cohesive three-party team: owner, architect-designer and construction firm (serving as the Construction Manager). Both the architect/design team and CM are selected based on qualifications, versus the lowest price or negotiated fees.

Advantages

In W.M. Jordan’s experience, the CMAR method­ facilitates a common goal of maximizing the final outcome of the project, and results in fewer change orders and a more manageable process through collaborative efforts from all parties.

The CMAR method allows the architect to utilize the construction firm’s building expertise and offer suggestions that add value to the project, reduce maintenance costs and reduce operational costs over the lifetime of the project.
Furthermore, CMAR enables all parties to collaborate and communicate openly to overcome budget concerns or identify and collectively overcome any issues early in the process, thus reducing unforeseen issues in the field.

To supplement the process, W.M. Jordan uses Building Information Modeling (BIM) in conjunction with a cloud-based project portal to share, collaborate and retain knowledge from design phase through construction, and even into the maintenance phase of the project. Details such as design changes, schedules, as-builts, and material selections are constantly updated and available to every member of the building and design team throughout the CMAR process.

Disadvantages

]The biggest disadvantage of CMAR is often the initial investment. While the savings and benefits over the lifetime of the project are often more significant with this method, the CMAR process can sometimes cost more than competitive jobs upfront.

There is no one right method of construction project delivery, however, identifying the optimum delivery method in the early stages of the project can often help to ensure successful project delivery with respect to the owner’s project goals, as well as schedule and budget constraints.

I welcome any owners seeking additional information to contact me at the phone number or email address provided. The W.M. Jordan team would love to guide you through the project delivery method selection process.

Robert Beale opened W. M. Jordan’s Wilmington office in 2012 with five employees. In four short years, staff has grown by 500 percent and two office expansions. Twenty-five staff members now serve clients in North and South Carolina from the office on Eastwood Road. Rob began his career with W. M. Jordan Company in 1996 while still in college at Virginia Tech. Rob joined the company full-time in 1998 as a project engineer upon graduating with a Bachelor of Science degree in building construction. In his 21 years with W. M. Jordan Company, Rob has managed nearly 70 projects representing over $500 million in contracts. Rob’s experience spans nearly every aspect of construction service delivery. Starting as the company’s first intern, Rob grew as a construction professional, taking on increasing levels of responsibility and new leadership roles. He’s worked in diverse capacities as a project engineer, project manager, estimator, project executive, office manager and business developer. He is also an active member of the Association of Builders and Contractors (ABC).

 

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